The co-sponsors of tax legislation designed to prevent MCI/WorldC...

The co-sponsors of tax legislation designed to prevent MCI/WorldCom from taking advantage of a tax loophole praised the Treasury Dept. for issuing a temporary regulation designed to block companies from using that loophole. The said House members wouldn’t push the measure any longer if Treasury would make the changes permanent. Critics contended that MCI/WorldCom was trying to avoid paying taxes by arguing that it should be treated as 2 separate entities in tax filings. MCI was seeking to register $10-15 billion in operating losses as separate from the $36 billion in debt forgiveness WorldCom received in bankruptcy protection, Sen. Santorum (R-Pa.) said in a floor statement as he offered legislation that would prevent the tax classification. Santorum, who called the provision a “loophole,” has said MCI would have been able to avoid $3.5-$5.25 billion in taxes. Rep. McCrery (R-La.) also introduced a bill (HR-2706) to prevent such tax status. On Oct. 2, McCrery and the bill’s 34 co-sponsors -- including House Commerce Committee Chmn. Tauzin (R-La.) -- sent Treasury Secy. John Snow a letter praising the changes and urging the regulation be made “permanent as soon as possible.” The letter said the regulations should close the loophole, but if they failed, the House would resume action on the bill. “We endorse your efforts to close an anomaly in the tax code that could cost taxpayers billions of dollars and provide a competitive disadvantage to companies emerging from bankruptcy,” the letter said.